A fair tax system

Thursday, September 22, 2016

The latest analysis from the Treasury shows that higher income households are paying a larger share of income tax, with lower income households paying less.

According to the Treasury's analysis of official data, the top 10 per cent of households are forecast to pay 37.2 per cent of all income tax in New Zealand in 2016/17, compared with 35.5 per cent in 2007/08 under the last Labour-led Government.

While higher income households are paying a larger share of income tax than they were in 2008, lower income households are paying less with the 30 per cent of households with the lowest incomes are forecast to pay just 5.4 per cent of income tax in the current 2016/17 year.

The Treasury also estimates that in 2016/17, 42 per cent of all households will pay less in income tax than they receive from welfare benefits, Working for Families, New Zealand Superannuation and accommodation subsidies.

This compares with 39 per cent in 2007/08.

So what this means is the increased support from the National-led Government to low income households means a very large number of these households effectively don't pay any net income tax once you take into account the transfers those households received back from the Government.

For the 30 per cent of households with the lowest incomes, the $1.7 billion of income tax they are expected to pay will be more than offset by the $10.6b they will receive in income support.

I think it is appropriate to maintain a tax and income support system that helps low and middle income households when they most need it.

I am pleased to be part of a responsible Government that supports policies to shares the gains of our growing economy.

The Treasury data shows exactly how much redistribution is occurring through the tax and welfare system, and how much it is growing, but National is in truth doing even more than this to help families.

We've seen a number of exciting new initiatives which makes things easier for New Zealand families.

Free doctor's visits for under 13s, insulating every state house that can be insulated, social workers in all low decile schools and free breakfasts in schools that want it to name a few.

Other National initiatives this year to assist low income family include increased Working for Families payments, more childcare assistance for low income working parents and increased benefits for families with children.

"I think it is appropriate to maintain a tax and income support system that helps low and middle income households when they most need it. "